December 6, 2024December 6, 2024 by The Daily Shot Editor: Lev Borodovsky

US trade deficit with Mexico hits a record high

The Daily Shot: 06-Dec-24
• The United States
• Canada
• The United Kingdom
• The Eurozone
• Japan
• China
• India
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Global Developments
• Food for Thought

The United States

1. Let’s begin with the labor market.

• Initial jobless claims were slightly higher last week compared to Thanksgiving week in 2023.

• Job cut announcements remained steady last month. It’s worth noting that the Challenger Index excludes small firms.

• What can we expect from today’s employment report? The market anticipates a rebound from October’s weak print. Below are the implied November job gains based on key leading indicators.

Source: Goldman Sachs; @MikeZaccardi

– Here is a forecast from Oxford Economics.

Source: Oxford Economics

• Stronger tax withholdings could indicate more robust wage growth.

Source: Mizuho Securities USA

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2. CFO optimism has been rebounding.

Source: Richmond Fed Read full article

3. Economists have been reducing their estimates of US recession probabilities. (2 charts).

Source: MRB Partners

Source: Goldman Sachs; @MikeZaccardi

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4. US productivity growth remains above its pre-COVID trend, …

Source: Deutsche Bank Research

… significantly outpacing that of other G7 economies.

Source: @financialtimes Read full article

5. The trade deficit narrowed in October as imports declined more than exports.

Source: @TheTerminal, Bloomberg Finance L.P.

Here is the trade balance excluding petroleum products.

– The US trade deficit with Mexico hit a record high.

– Here is a look at US imports from Mexico, Canada, and China.

Source: @WSJ Read full article

– The discrepancy between China’s reported exports to the US and US-reported imports from China has widened in recent years (see explanation below).

Source: @economics Read full article

Canada

1. Canada’s trade deficit narrowed again in October.

2. The market still sees a jumbo BoC rate cut as a possibility this month.

Economists expect a 50 bps reduction.

Source: @TheTerminal, Bloomberg Finance L.P.

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3. US and Canadian bond yield trajectories have diverged.

Source: @TheTerminal, Bloomberg Finance L.P.

The United Kingdom

1. UK firms anticipate greater increases in output prices …

Source: @economics Read full article

… and foresee higher consumer inflation over the next year.

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2. New car registrations improved but remained below 2023 levels last month.

3. UK oil and gas production is projected to continue declining.

Source: @markets Read full article

The Eurozone

1. Germany’s industrial production unexpectedly fell again in October, further deepening the slump. Recession risks are rising.

Source: @economics Read full article

• French factory output held steady.

• Spain’s industrial production surged.

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2. Germany’s construction PMI indicated a sharper contraction last month, signaling a deepening recession in the sector.

Construction subcontractor usage has collapsed.

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3. Marine Le Pen stated that France could resolve its budget impasse within weeks if the new prime minister adopts a slower deficit reduction strategy, criticizing the outgoing administration’s target of a 3% budget gap by 2029 as unrealistic. She emphasized the need for a “reasonable trajectory” that prioritizes reindustrialization and support for businesses to foster economic growth and savings. The 10-year spread with Germany narrowed.

– France has consistently fallen short of meeting its deficit targets.

Source: @bpolitics Read full article

• French households are more interest-rate sensitive compared to other euro-area countries.

Source: MRB Partners

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4. Euro-area retail sales retreated from recent highs in October.

Japan

1. Japan’s base salaries are rising at the fastest pace on record.

Source: @economics Read full article

• Household spending was below last year’s levels but was stronger than expected.

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2. The market-implied probability of a BoJ rate hike this month surged following the strong wage growth report. (2 charts).

Source: @TheTerminal, Bloomberg Finance L.P.

China

1. The CSI 300 and Hang Seng Index are holding support.

2. Economists see steep PBoC rate cuts ahead.

Source: @markets Read full article

3. Would direct financial support for low-income rural households in China boost sentiment and consumer spending?

Source: Eric Zhu, Bloomberg Economics, @TheTerminal, Bloomberg Finance L.P. Read full article

India

1. The RBI left its benchmark rate unchanged, …

… but cut the reserve ratio.

Source: Reuters Read full article

• Capital Economics expects rate cuts to begin next year.

Source: Capital Economics

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2. Bond yields rose after the RBI refrained from delivering a rate cut.

Emerging Markets

1. Argentina’s central bank cut rates amid easing inflation expectations.

Source: Reuters Read full article

Source: @economics Read full article

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2. Vietnam’s CPI was lower than expected last month.

• Vietnam’s exports were above 2023 levels but softer than expected.

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3. Median policy rate spreads between EM and DM countries could widen if more emerging market central banks delay rate cuts vs. the Fed and ECB.

Source: Deutsche Bank Research

Cryptocurrency

1. The total crypto market cap reached new highs of around $3.5 trillion …

… and just above $1 trillion excluding BTC and ETH.

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2. There was an unusual spike in BTC long positions as the cryptocurrency pulled back from all-time highs.

Source: Coinglass

3. The Crypto Fear & Greed Index continues to fade from “extreme greed” territory.

Source: Alternative.me

4. So far, Litecoin (LTC) has outperformed top crypto peers this week as altcoins take the lead.

Source: FinViz

5. BTC/KRW plunged amid South Korea’s political turmoil, although the pair quickly recovered.

Source: @KaikoData

6. Bitcoin’s recent break above $100K was not initially realized across exchanges.

Source: @KaikoData

7. Crypto venture capital investment has trended lower over the past two years.

Source: PitchBook

8. The bitcoin/gold cross reached a new high this week.

9. Crypto fund inflows keep hitting record highs.

Source: BofA Global Research

Commodities

1. Cocoa prices are surging again.

Source: barchart.com Read full article

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2. Diamond prices have been under pressure.

Source: @markets Read full article

Energy

1. OPEC+ postponed its planned production increase by three months due to weak market fundamentals.

Source: @markets Read full article

• Crude oil volatility has been falling (2 charts).

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2. US natural gas in storage is back above its five-year range.

3. MLPs have been outperforming the overall energy sector, …

… amid increased demand from high-net-worth investors.

Source: BofA Global Research

Equities

1. Speculative shares continue to outperform.

• Meme stocks:

Source: Reuters Read full article

• Speculative tech:

• Post-IPO companies:

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2. The CBOE Skew Index reaching an all-time high (chart below) does not indicate heightened caution but rather reflects growing bullishness among the majority of traders. The spread measured by the index widens not because the bearish minority is more concerned about a crash but because the bullish consensus has become even less concerned. High Skew values typically align with bull markets, suggesting Wall Street’s optimism rather than fear.

Indeed, the percentage of investors assigning less than a 10% probability to a market crash is at multi-year highs.

Source: MarketWatch Read full article

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3. Small-cap fund inflows have surged this year.

Source: BofA Global Research

4. This chart shows the annual distribution of the S&P 500 over the past century. Roughly 39% of the years have seen >20% returns, according to Deutsche Bank.

Source: Deutsche Bank Research

5. Lofty US equity valuations suggest weaker long-term equity returns.

Source: J.P. Morgan Asset Management

• Here is the S&P 500 price-to-book ratio.

Source: BofA Global Research

• This chart compares US valuations with other global markets.

Source: Goldman Sachs; @MikeZaccardi

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6. Next, we have an AI-generated scenario analysis of the potential impact of mass deportations on select US sectors.

Credit

1. US capital market liquidity is starting to recover.

Source: JP Morgan Research

2. CMBS spreads continue to narrow.

Source: Aazan Habib, Paradigm Capital

Global Developments

1. Central banks have accelerated their policy easing.

Source: BofA Global Research

2. Here is a look at the percentage of institutional investors planning allocations to various strategies over the next 12 months.

Source: SG Prime Services; @WallStJesus

3. There has been an increase in global armed conflicts in recent years.

Source: JP Morgan Research

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Food for Thought

1. Streaming subscriber habits with pauses and returns across US platforms:

Source: @WSJ Read full article

2. Average construction time for US single-family and multi-unit buildings:

Source: Torsten Slok, Apollo

3. Rising conflict intensity in Africa:

Source: @bpolitics Read full article

4. Wages of unauthorized immigrants compared to authorized immigrants and native-born workers:

Source: Goldman Sachs; @MikeZaccardi

5. Methane emissions by source:

Source: @financialtimes Read full article

6. Tracing the evolution of the alphabet from proto-sinaitic to modern Latin script:

Source: Visual Capitalist Read full article

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Have a great weekend!